A study out of West Virginia University finds that younger people are more likely than older people to make decisions based on sunk costs. These are costs we’ve already spent and can’t get back. According to the “sunk-cost fallacy,” we make decisions about our future based on our past investments, or sunk costs. This is not good.
Think about all the sunk costs that have sucked you dry over the years. The bad movies you suffered through because you paid $10 for the tickets and weren’t about to walk out. The $20 sea urchin sashimi you ate even though it tasted like rancid algae. The day-long shopping trip that ended with you buying a crocodile-skin belt you neither wanted nor needed (nor liked) but felt compelled to buy to justify the day you spent trying to spend money. The argument you prolonged because you’d already spent so much time and energy trying to convince your spouse of your rightness, that you couldn’t afford to give up.
Economists would argue that factoring in sunk costs leads to bad decision-making. Focus instead on future costs and benefits. In other words, leave the theater if the movie sucks and enjoy the sunny day instead. Send the sea urchin back and order the salmon. Drop the argument and go take a nap.
Photo by bopuc on Flickr